ANNUAL REPORT TRUSTEES REPORT...3. Te Ohu Kai Moana Trust & Group...4. Te Ohu Kai Moana Trustee Limited Takutai Trust...57

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1 ANNUAL REPORT TRUSTEES REPORT...3 Te Ohu Kai Moana Trust & Group...4 Te Ohu Kai Moana Trustee Limited Takutai Trust...57 REPORT AGAINST THE 2013 ANNUAL PLAN MINUTES OF HUI-A-TAU...77 STATEMENT OF COMPREHENSIVE INCOME

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3 ANNUAL REPORT 2014 Purpose of Te Ohu Kai Moana As defined in the Māori Fisheries Act 2004, the purpose of Te Ohu Kai Moana is to advance the interests of iwi individually and collectively, primarily in the development of fisheries, fishing, and fisheries-related activities to ultimately benefit the members of iwi and Maori generally; further the agreements made in the Deed of Settlement; assist the Crown to discharge its obligations under the Deed of Settlement and the Treaty of Waitangi; and contribute to the achievement of an enduring settlement of the claims and grievances referred to in the Deed of Settlement. Activities of Te Ohu Kai Moana and associated trusts and entities The activities of the Trust are governed by Te Ohu Kai Moana Trustee Limited (the Trustee), the corporate trustee for Te Ohu Kai Moana Trust. Te Ohu Kai Moana Trustee Limited also acts as the corporate trustee for the Takutai Trust (the Māori Commercial Aquaculture Settlement Trust), established under the Māori Commercial Aquaculture Claims Settlement Act The purpose of the Takutai Trust is to receive aquaculture settlement assets from the Crown or regional councils, allocate and transfer aquaculture settlement assets to Iwi Aquaculture Organisations; hold assets pending their allocation to iwi; determining allocation entitlements; facilitating iwi to be recognised as Iwi Aquaculture Organisations and other matters relating to the Aquaculture Settlement. The Trustee also appoints the directors of Aotearoa Fisheries Limited (AFL), Te Putea Whakatupu Trustee Limited (TPWT) and Te Wai Maori Trustee Limited (TWMT). AFL is the commercial arm of the allocation model for the fisheries settlement assets retained and managed centrally. Its operations include the harvesting, processing and marketing of seafood throughout the world. The activities of AFL for the last financial year, are fully described in that company s annual report, available at maori.nz, and also in Te Tini a Tangaroa (see below). Relevant financial information as it affects Te Ohu Kai Moana Trust is included within the financial statements attached to this report. Te Putea Whakatupu Trust and Te Wai Māori Trust activities and achievements for the last financial year are set out within Te Tini a Tangaroa. Financial Reporting of Te Ohu Kai Moana and associated trusts and entities This Annual Report provides the financial statements and other required financial information, including our report against the 2014 Annual Plan for Te Ohu Kai Moana Trust, Takutai Trust and Te Ohu Kai Moana Trustee Limited. This Annual Report is distributed to mandated iwi organisations, representative Maori organisations, recognised iwi organisations, as defined in the Maori Fisheries Act 2004, and the members of Te Kawai Taumata. It is also available in digital format and can be downloaded from our website at The Report Against the 2014 Annual Plan provides a commentary on the activities undertaken during the financial year as a comparison to those that were set out at the beginning of the year in the annual plan distributed to iwi. In depth reporting on the activities and achievements In addition to the financial reports attached, the activities and achievements of the Te Ohu Kaimoana Group have been reported on in depth in our complementary report, Te Tini a Tangaroa Annual Commentary For The Year Ending 30 September Copies of that document have been widely distribute to all mandated iwi organisations, representative Maori organisations, recognised iwi organisations, iwi asset holding companies, Te Kawai Taumata members and our subsidiaries. Further copies are available on request or downloadable from our website For and on behalf of Te Ohu Kai Moana Trustee Limited (the Trustee) 4 Dec 2014 Director Director Date 3

4 TE OHU KAI MOANA TRUST & GROUP Statement of Comprehensive Income... 5 Statement of Changes in Equity...6 Balance Sheet... 7 Statement of Cash Flows... 8 Reconciliation of Net Surplus to Cash Flow from Operating activities...9 Notes to the Financial Statements...10 Auditor s Report

5 STATEMENT OF COMPREHENSIVE INCOME NOTES GROUP GROUP PARENT PARENT $ 000 $ 000 $ 000 $ 000 Operating revenue from: Te Ohu Kai Moana Trust activities 3 1,705 8,238 1,705 8,238 ACE round disputes held in trust 6c 1, , Share of associates (loss) / profit 11a 4,391 (1,208) 4,391 (1,208) Gains on investment portfolio 13 4,352 3,108 4,352 3,108 Increase in holding value of Aotearoa Fisheries Limited income shares held in trust for iwi Dividend receivable on income shares held in trust for iwi Maori Authority Tax Credits received and held in trust for iwi TOTAL OPERATING REVENUE 11,971 10,984 11,971 10,984 Operating expenditure 4 4,783 4,991 4,783 4,991 NET OPERATING SURPLUS 7,188 5,993 7,188 5,993 Share of associates other Comprehensive income (989) 1,280 (989) 1,280 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 6,199 7,273 6,199 7,273 The above statement of comprehensive income should be read in conjunction with the accompanying notes on pages 10 to 47. 5

6 STATEMENT OF CHANGES IN EQUITY TRUST CAPITAL MFA RESERVES GFS TRUST ACE ROUND DISPUTES NOTE 6(a) NOTE 6(b) NOTE 6(c) TOTAL PARENT Group $ 000 $ 000 $000 $ 000 $ 000 $ 000 Balance at 1 October ,287 57, , , ,338 Net surplus for the year 7, ,188 7,188 Transfers to Reserves (1,600) , Other comprehensive income (989) (989) (989) Total comprehensive income for the year 4, ,296 6,199 6,199 Transactions with beneficiaries: Allocated to beneficiaries Settlement assets allocated to iwi - (336) - - (336) (336) Distributions to or on behalf of associated trusts - (1,000) (25) - (1,025) (1,025) Balance at 30 September ,886 56,277 1,032 2, , ,176 TRUST CAPITAL MFA RESERVES GFS TRUST ACE ROUND DISPUTES TOTAL PARENT NOTE 6(a) NOTE 6(b) NOTE 6(c) Group $ 000 $ 000 $000 $ 000 $ 000 $ 000 Balance at 1 October ,918 70, , ,596 Net surplus for the year 5, ,993 5,993 Transfers to Reserves (904) Other comprehensive income 1, ,280 1,280 Total comprehensive income for the year 6, ,273 7,273 Transactions with beneficiaries: Allocated to beneficiaries Settlement assets allocated to iwi - (12,489) - - (12,489) (12,489) Distributions to or on behalf of associated trusts - (1,000) (42) - (1,042) (1,042) Balance at 30 September ,287 57, , , ,338 The above statement of changes in equity should be read in conjunction with the accompanying notes on pages 10 to 47. 6

7 BALANCE SHEET NOTES GROUP GROUP PARENT PARENT $ 000 $ 000 $ 000 $ 000 EQUITY Trust capital and retained earnings 172, , , ,900 Maori Fisheries Act and other classified reserves 6 59,677 59,438 59,677 59,438 TOTAL EQUITY 232, , , ,338 Represented by: CURRENT ASSETS Cash and cash equivalents 7 5,068 7,221 5,068 7,221 Receivables & prepayments 8 5, , Redeemable preference shares 12 20,000 20, Total Current Assets 30,633 27,799 10,633 7,799 NON CURRENT ASSETS Property, plant & equipment Investment in subsidiaries ,797 11,797 Investment in associates 11 82,543 80,897 82,543 80,897 Other financial assets 13 73,771 73,319 73,771 73,319 Aotearoa Fisheries Limited income shares held in trust for iwi 14 5,502 5,392 5,502 5,392 Quota shares 15 42,316 42,526 42,132 42,342 Total Non Current Assets 204, , , ,839 TOTAL ASSETS 234, , , ,638 CURRENT LIABILITIES Payables and accruals 16 1,611 1,308 1,611 1,308 Maori Fisheries Act assets allocated not transferred Provisions for other liabilities and charges Total Current Liabilities 2,230 1,804 2,230 1,804 NON CURRENT LIABILITIES Provisions for other liabilities and charges Total Non Current Liabilities TOTAL LIABILITIES 2,230 2,300 2,230 2,300 NET ASSETS 232, , , ,338 For, and on behalf of, the Trustee, who approved and authorised these financial statements on 4 December Matiu Rei CHAIRMAN Hinerangi Raumati DIRECTOR The above balance sheet should be read in conjunction with the accompanying notes on pages 10 to 47. 7

8 STATEMENT OF CASH FLOWS NOTES GROUP GROUP PARENT PARENT $ 000 $ 000 $ 000 $ 000 CASH FLOWS FROM OPERATING ACTIVITIES Cash provided from: Receipts from sale of ACE 1,212 1,243 1,212 1,243 Refund of Maori Authority Tax Credits - 7,301-7,301 Receipts from ACE Round disputes 1, , Other ,001 9,080 3,001 9,080 Cash applied to: Payments to suppliers and employees 4,400 4,941 4,400 4,941 Taxation paid on behalf of other trusts ,400 5,018 4,400 5,018 Net cash inflow /(outflow) from Operating Activities (1,399) 4,062 (1,399) 4,062 CASH FLOWS FROM INVESTING ACTIVITIES Cash provided from: Cash drawdown from Joint Investment Portfolio 3,900 2,000 3,900 2,000 Proceeds from sale of Anton s quota to iwi 1,483-1,483 - AFL dividend received for Te Ohu Kaimoana 11-1,366-1,366 AFL dividend received for iwi shares held in trust ,383 3,472 5,383 3,472 Cash applied to: Purchase of fixed assets Purchase of Anton s quota 5,000-5,000-5, , Net cash inflow from Investing Activities 372 3, ,460 CASH FLOWS FROM FINANCING & TRUST CAPITAL ACTIVITIES Cash applied to: Distributions to associated trusts 6(a)(i) 1,000 1,000 1,000 1,000 Distributions to iwi 6(a)(ii) ,126 1,515 1,126 1,515 Net cash outflow from Financing Activities (1,126) (1,515) (1,126) (1,515) NET INCREASE IN CASH AND CASH EQUIVALENTS (2,153) 6,007 (2,153) 6,007 Opening cash and cash equivalents brought forward 7,221 1,214 7,221 1,214 CASH AND CASH EQUIVALENTS HELD AT YEAR END 7 5,068 7,221 5,068 7,221 The above statement of cashflows should be read in conjunction with the accompanying notes on pages 10 to 47. 8

9 RECONCILIATION OF NET SURPLUS TO CASH FLOW FROM OPERATING ACTIVITIES GROUP GROUP PARENT PARENT $ 000 $ 000 $ 000 $ 000 Net Surplus 7,188 5,993 7,188 5,993 Add (Deduct) non-cash items: Depreciation Share of associates profit (4,391) 1,208 (4,391) 1,208 Increase in holding value of Aotearoa Fisheries Limited income shares held in trust for iwi (110) (5) (110) (5) Dividend receivable on income shares held in trust for iwi (117) - (117) - Notional interest on redeemable preference shares Gains on financial investments (4,352) (3,108) (4,352) (3,108) Losses on disposal of assets Provisions for long term liabilities (8,895) (1,739) (8,895) (1,739) Movements in working capital items: Increase/(Decrease) in receivables & prepayments 420 (233) 420 (233) Increase/(Decrease) in payables & accruals (112) 41 (112) (192) 308 (192) Net cash inflow/(outflow) from Operating Activities (1,399) 4,062 (1,399) 4,062 The above reconciliation of net surplus to cash flow from operating activities should be read in conjunction with the accompanying notes on pages 10 to 47. 9

10 NOTES TO THE FINANCIAL STATEMENTS NOTE 1 REPORTING ENTITY Te Ohu Kai Moana Trust (the Trust) was established under the Maori Fisheries Act 2004 (the Act). In accordance with the Act, the purpose of The Trust is to advance the interests of iwi, individually and collectively, in the development of fisheries, fishing, and fisheries-related activities in order to: a. ultimately benefit the members of iwi and Maori generally; and b. further the agreements made in the Deed of Settlement; and c. assist the Crown to discharge its obligations under the Deed of Settlement and the Treaty of Waitangi; and d. contribute to the achievement of an enduring settlement of the claims and grievances referred to in the Deed of Settlement. The Te Ohu Kai Moana Trust Group (the Group) comprises the Trust and its subsidiary, Charisma Developments Limited. Equity Transferred 29 November 2004 On and from 29 November 2004, the Appointed Day, all existing undertakings, assets and liabilities of the Treaty of Waitangi Fisheries Commission were vested in Te Ohu Kai Moana Trustee Limited, acting as trustee of Te Ohu Kai Moana Trust. 10

11 NOTES TO THE cont d... NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following specific accounting policies, which materially affect the measurement of financial performance, movements in equity, financial position and cash flows have been established and consistently applied: a) Basis of Preparation The Trust elects to report as a reporting entity for the purposes of the Financial Reporting Act The financial statements and the Group financial statements are presented in accordance with the Maori Fisheries Act 2004 and with New Zealand Generally Accepted Accounting Practice. b) Statement of Compliance The financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice and other applicable Financial Reporting Standards. They comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and International Financial Reporting Standards (IFRS). c) New Accounting Standards and Interpretations (i) Changes in accounting policy and disclosures There have been no changes to accounting policies. (ii) Accounting standards and interpretations issued but not yet effective Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Group for the annual reporting period ending 30 September These are outlined in the table below. Reference Title Impact on Group financial statements NZ IFRS 9 (2014) Financial Instruments No financial impact but the amendments may affect the presentation of the Group s financial statements. Application date of standard Application date for Group 1 January October 2018 d) Basis of Measurement The measurement and reporting of financial performance, movements in equity, financial position and cash flows is based on historical cost, modified by the revaluation of certain assets. The financial statements are presented in New Zealand dollars and all values are rounded to the nearest thousand dollars. 11

12 NOTES TO THE cont d... NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont d... e) Use of Estimates and Judgements The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty surrounding these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of a particular asset or liability in future periods. In the process of applying the accounting policies, management has made the following significant judgments: (i) Interest in Aotearoa Fisheries Limited In accordance with the Act the Trust owns 100% of the voting shares in Aotearoa Fisheries Limited (AFL) and is entitled to appoint and remove Directors of that company. NZ IFRS 10 Consolidated Financial Statements defines control as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. As the voting shares have no beneficial interests or rights attached to them they are treated as having neither control nor any value for the purposes of financial reporting. The Act requires the Trust to hold 20% of the income shares in AFL. These shares are recorded using the equity method. The Act also requires the Trust to hold AFL income shares on behalf of iwi. These shares are valued on the basis of the net asset value recorded by AFL in its audited financial statements. (ii) Classification of Maori Fisheries Act Reserves Te Ohu Kai Moana Trust holds in trust settlement assets for iwi under the Act. In accordance with the Act iwi are entitled to a share of those settlement assets upon achieving the status of a mandated iwi organisation (MIO) and subsequently on reaching coastline and harbour agreements with neighbouring iwi. Until MIO status is achieved the Trust has no obligations to make settlements under the Act. Management has concluded it is appropriate to classify the settlement assets as Trust equity until an iwi becomes entitled to receive them. Settlement assets allocated to an iwi are re-classified to liabilities until actual transfer of ownership occurs. (iii) Quota Shares The Trust tests quota shares held by it, either in its own right or in trust for iwi, for impairment on an annual basis. For the purpose of testing assets for impairment the Trust appoints external valuers to determine the fair value of all quota shares held at balance date. A valuation requires making various assumptions about the future including estimating present values of future cash flows by applying an appropriate discount rate to the cash flows receivable from the ownership or use of an asset. An impairment exists when the carrying value of an asset exceeds its fair value. f) Basis of Consolidation Subsidiaries are entities in which the Trust has the capacity to control the financing and operating policies to obtain ownership benefits. The consolidated financial statements comprise the Trust and its subsidiary Charisma Developments Limited (CDL). The financial statements of CDL are prepared for the same reporting period as the Trust, using consistent accounting policies. Consolidation involves adding corresponding assets, liabilities, revenues and expenses on a line-by-line basis. All significant transactions between the group entities have been eliminated on consolidation. In the Trust financial statements, investments in subsidiaries are recognised at cost less any impairment charges. 12

13 NOTES TO THE cont d... NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont d... g) Trust Equity and Reserves Trust equity is split into two sections to separately identify the equity accumulated in the Trust and the reserves the Trust is required to maintain in accordance with the Act, or other agreements or deeds until the assets are allocated and transferred to mandated iwi organisations (MIOs), their asset holding companies, or the beneficiaries identified in the other agreements or deeds. The Act requires that the cash to iwi set aside under s137(1)(d) accumulates earnings attributable to it. Interest is attributed on a monthly basis at the interest rate applicable to funds held at call. h) Allocation and Transfer of Assets to Iwi per the Maori Fisheries Act 2004 Distributions of assets through allocation and transfer to mandated iwi organisations or their asset holding companies are recorded at the carrying value of the applicable asset in the financial statements. Assets allocated, but not transferred, are classified as liabilities in the Balance Sheet. Funds held for the Global Fisheries Scholarship Trust are $1.03 million (see para 6(b), page 21) i) Taxation The Trust and its wholly owned subsidiary are registered as charitable organisations with the Department of Internal Affairs and are therefore treated as exempt from income tax. j) Goods and Services Tax These financial statements have been prepared on a GST exclusive basis with the exception of receivables and payables, which are stated inclusive of GST. k) Financial Assets and Liabilities (i) Receivables Trade receivables are classified as loans and receivables, which generally have standard commercial terms of trade, are recognised and are carried at original invoice amount less an allowance for amounts assessed to be uncollectable. Collectability of trade receivables is reviewed on an on-going basis. Individual debts that are known to be uncollectable are written off when identified. (ii) Financial Investments The Group classifies its financial investments (except for associates, subsidiaries, shares in unlisted companies and joint ventures) at fair value through profit and loss as the Group invests in these financial assets with a view to profiting from their total return in the form of interest or increases in the fair value. Gains and losses arising from changes in the fair value of financial investments are recognised in the statement of comprehensive income in the period in which they arise. The Trust has classified its financial investments as level 2 in the fair value hierarchy. (iii) Payables Trade payables are classified as financial liabilities with settlement of payments being on normal commercial terms. l) Investments in Subsidiaries Investments in subsidiaries are stated at cost less any impairment identified. 13

14 NOTES TO THE cont d... NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont d... m) Investments in Associates Associates are entities over which the Trust has the capacity to exercise significant influence and are not subsidiaries or joint ventures. Associates have been reflected in the parent and consolidated financial statements on an equity accounting basis, which shows the Trust s beneficial share of retained surpluses and total other comprehensive income in the consolidated statement of comprehensive income, and its share of post-acquisition increases or decreases in net assets in the consolidated balance sheet. AFL income shares held in trust for iwi are recorded at the ownership share of the value that represents their proportion of the net assets of AFL. The movement in the AFL net assets is reflected in the consolidated statement of comprehensive income and the share of post-acquisition increases or decreases in net assets in the consolidated balance sheet. The financial statements of AFL are prepared for the same reporting period as the Trust. n) Redeemable Preference Shares (RPS) The RPS are classified as loans and receivables in the Group financial statements, in accordance with NZ IAS 39 Financial Instruments: Recognition and Measurement. The RPS agreement allows the Trust to put the RPS in full or a portion of it to AFL at any date after 29 November 2011 (the first redemption date) until 29 November The RPS has been classified as a current asset since November o) Intangible Assets Quota shares have an indefinite useful life and generate economic benefits beyond one year. Quota shares are held at deemed cost and tested annually for impairment. Any adjustments made to recognise impairment are reported in the statement of comprehensive income. Quota shares held by the parent are held in trust for and on behalf of iwi. They are not able to be sold by the Trust. New Zealand Units (NZUs) issued as part of the compensation to quota owners under the Fishing Allocation Plan allowed for in the Climate Change Response Act 2002 are held as intangible assets at a deemed cost of nil. 14

15 NOTES TO THE cont d... NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont d... p) Property, Plant and Equipment (i) Measurement The Trust has the following classes of property, plant & equipment: Office Equipment Fixture and fittings IT hardware Other Leasehold Improvements Property, plant and equipment are stated at cost, including costs directly attributable to bringing the asset to its operating condition, less accumulated depreciation and any impairment in value. (ii) Depreciation Depreciation is calculated on a straight-line basis on all property, plant and equipment, other than capital work in progress, at depreciation rates calculated to allocate the asset s cost less estimated residual value, over their estimated useful lives. Major depreciation periods are: Office Equipment years Fixture and fitting years IT Hardware...3 years Other...3 years Leasehold improvements are depreciated over the earlier of either their economic life or the term of the lease. The current lease term expires 30 September 2017, and has a right of renewal for two additional periods of 3 years. Asset residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. q) Impairment The carrying amounts of the Group s assets are reviewed at each reporting date to determine whether there is any indication of impairment. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. If it is not possible to estimate the recoverable amount of the individual asset, the Group determines the recoverable amount of the cash generating unit to which the asset belongs. Impairment losses directly reduce the carrying amount of assets and are recognised in the statement of comprehensive income. r) Leases The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. The Trust has entered into operating leases for certain fixed assets. Operating lease payments, where the lessors effectively retain substantially all the risks and benefits of ownership of the leased items, are charged to the statement of comprehensive income in the periods in which they are incurred. 15

16 NOTES TO THE cont d... NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont d... s) Revenue Recognition Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. (i) Revenue from Annual Catch Entitlement (ACE) sales ACE is the annual right to catch a specific amount of a relevant fish stock within the quota management system. ACE is allocated on the first day of the fishing year to the owner of the quota shares from which it is generated. ACE is sold by the Trust to iwi organisations in accordance with section 152 of the Maori Fisheries Act Invoices are raised in April and October each year to the relevant iwi organisations upon the commencement of the relevant ACE round. The total amount invoiced is initially accrued as deferred income and subsequently amortised and recognised as income over the twelve months of the respective fishing years. Proceeds from the sale of ACE to iwi are used to pay government and industry levies and costs incurred by the Trust as owner of quota yet to be allocated and transferred to iwi. The balance of ACE sale proceeds contributes towards the costs of administering the ACE rounds and participating in fisheries management organisations. (ii) Interest Income Revenue is recognised as the interest accrues using the effective interest method. (iii) Dividends Revenue is recognised when the Trust s right to receive the payment is established. Under s76(2) of the Maori Fisheries Act 2004 dividends are calculated at 40% of Aotearoa Fisheries Limited consolidated net profit after tax. t) Derivative Financial Instruments The Group may use derivative financial instruments such as interest rate swaps to hedge its risks associated with interest rates from time to time. Such derivative financial instruments are recorded at fair value. Derivatives are carried as assets in the balance sheet when their fair value is positive and as liabilities when their fair value is negative. Net movements in fair value are recorded in the profit or loss. Exposure to credit and interest risks arises in the normal course of the Group s operation. 16

17 NOTES TO THE cont d... NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont d... u) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. The Act requires an audit of the activities of the Trust to be arranged every four years and an independent review not later than eleven years after its commencement. Provisions towards the costs of the review were made, each year until 2013, on the basis of management s best estimates of the future costs. Previously provisions were also made for the four year audits. Following the completion of the 2012 audit no provisions have been made for any subsequent audits. Any costs incurred will be expensed in the year of audit. The first and second four year audits were performed in 2008 and 2012 respectively and the eleven year review process commenced in 2014 with a review completion date of 31 May Actual costs incurred during the review process may differ from the provisions originally made. Provisions made in respect of each obligation are based on Management s best estimate of the expenditure required to settle the obligation at the reporting date. v) Employee Benefits All short term and long term obligations relating to employee legal entitlements including annual leave are accrued and recognised in the balance sheet. The liability is equal to the present value of the estimated future cash outflows as a result of employee services provided at the reporting date. Provisions made in respect of employee benefits expected to be settled within twelve months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. w) Cash and Cash Equivalents Cash and cash equivalents in the balance sheet are classified as loans and receivables, comprising of cash on hand, call deposits and short term deposits with an original maturity of three months or less. x) Statement of Cash Flows For the purpose of the statement of cash flows, cash consists of cash and cash equivalents as defined above. The cash flows included in the statement of cash flow are stated on a gross basis. y) Comparative Figures Some comparative figures have been reclassified to conform to changes in presentation in the current year. 17

18 NOTES TO THE cont d... NOTE 3 OPERATING REVENUE FROM TE OHU KAI MOANA TRUST ACTIVITIES GROUP & PARENT $ 000 $ 000 Revenue from sale of ACE 1,212 1,243 Refund of Maori Authority Tax Credits - 6,772 Interest received Other TOTAL 1,705 8,238 Maori Authority Tax Credits (MATCs) MATCs represent refunds from Inland Revenue Department (IRD) of Maori Authority Tax Credits attached to dividends and taxable bonus share issues received from Aotearoa Fisheries Limited. On 30 May 2013 the Trust received $6.77 million of MATCs from IRD that were related to the taxable bonus issue made by AFL on 17 December 2012 and dividends received in December 2011 and No dividend was received from AFL in 2014 and therefore no MATCs were received or receivable in the current year. 18

19 NOTES TO THE cont d... NOTE 4 OPERATING SURPLUS Included in the operating surplus before taxation are the following operating expenses: NOTES GROUP & PARENT $ 000 $ 000 Fees paid to Auditor Audit of the financial statements Facilities and rental Travel and accommodation Directors remuneration 19 ( e ) Remuneration of Te Kaiwai Taumata members - 9 Employee entitlements 2,311 2,280 Professional services External reporting and communication Quota related fees and levies Administration Scholarships Depreciation Fixtures and fittings 2 4 Leasehold improvements Office equipment 1 3 IT hardware Software 1 2 Provision for 4-year audit - (19) Provision for 11-year review - 60 Costs recovered from associated entities (559) (652) TOTAL OPERATING EXPENDITURE 4,783 4,991 NOTE 5 TAXATION The Trust and Charisma Developments Limited are registered as charitable entities with the Department of Internal Affairs under the Charities Act 2005 and are therefore exempt from income tax. 19

20 NOTES TO THE cont d... NOTE 6 MAORI FISHERIES ACT AND OTHER CLASSIFIED RESERVES NOTES GROUP & PARENT $ 000 $ 000 Maori Fisheries Act reserves 6(a) 56,277 57,369 Global Fisheries Scholarship Trust 6(b) 1, ACE Round disputes held in Trust 6(c) 2,368 1,072 Balance as at 30 September 59,677 59,438 6 (a) Maori Fisheries Act reserves The Maori Fisheries Act details the amounts set aside for allocation and transfer to iwi and associated trusts. The relevant sections of the Act are included with the name of each reserve in the table below. GROUP & PARENT $ 000 $ 000 Quota shares to be allocated s140 - s148 42,132 42,342 Aotearoa Fisheries Limited income shares held in trust for iwi - s139 5,502 5,392 Dividend receivable on Aotearoa Fisheries Limited income shares held in trust for iwi - s76(2) Maori Authority Tax Credits received held in trust for iwi Te Wai Maori Trust capital s137(1)(b) & s103(3) 6,000 7,000 Cash top up for quota shortfall s137(1)(c) 1,166 1,188 Cash to iwi s137(1)(f) TOTAL 56,277 57,369 6 (a)(i) Te Wai Maori Trust Under s103(3) of the Act, Te Ohu Kai Moana Trust must pay not less than $1 million per year, until a total sum of $20 million has been received by Te Wai Maori Trust, including the $10 million transferred under s137(1)(b) in October (a)(ii) Settlement Assets to be allocated During 2014, no iwi was recognised as a MIO by Te Ohu Kai Moana and therefore no settlement assets were allocated (2013: 1). Details of assets allocated and transferred are shown in note 19(a) of this report. One Coastline agreement was completed during the year (2013: 5) and no harbour agreements were completed (2013: 3). 20

21 NOTES TO THE cont d... NOTE 6 MAORI FISHERIES ACT AND OTHER CLASSIFIED RESERVES cont d... 6 (b) Global Fisheries Scholarship Trust The Global Fisheries Scholarship Trust (GFS) was created in The funds are invested as part of Te Ohu Kaimoana s investment portfolio and share on a proportional basis the income generated and valuation movements based on the percentage of the total fund held. Administration is undertaken by Te Ohu Kai Moana Trustee Limited. GROUP & PARENT $ 000 $ 000 Balance as at 1 October Income Scholarship costs (25) (42) Balance as at 30 September 1, (c) ACE Round Disputes Held in Trust These funds have arisen from disputes over representation and mandate issues relating to quota lease and annual catch entitlement distribution rounds. The funds are held on deposit awaiting resolution of each dispute. In some cases the amounts cover disputes involving multiple leases and ACE round years $ 000 $ 000 Balance as at 1 October 1, Income from sale of ACE 1, Income from interest Administration costs incurred (57) (30) Income tax reversal/(provision) 154 (154) Balance as at 30 September 2,368 1,072 The tax status on income derived from ACE round disputes is currently being reviewed with Inland Revenue. Te Ohu Kaimoana considers that income derived through the sale of disputed ACE is derived by Te Ohu Kaimoana and is therefore exempt. The income tax provision made in 2013 has therefore been reversed in the current year and provisional tax paid has been refunded by Inland Revenue. Final confirmation from Inland Revenue of this interpretation had not been received at balance date. 21

22 NOTES TO THE cont d... NOTE 6 MAORI FISHERIES ACT AND OTHER CLASSIFIED RESERVES cont d... Details of Iwi / Disputes and funds held $ 000 $ 000 Ngai Takoto, Ngati Kuri, Te Aupouri and Te Rarawa Iwi of Hauraki/Waikato Coromandel Scallops Southern FMA8 Iwi Whakatohea Ngai Takoto CRA9 Iwi Motiti Island Ngai Tahu and Ngati Toa Rangatira FMA7 (OYS7C) Whangaehu River to Manawatu River 25 6 Ngati Maru Ngati Kahungunu (Freshwater) 16 - Rongomaiwahine/Ngati Kahungunu ORH7A(Ngai Tahu, Rangitane(Te Tau Ihu) and Ngati Toa Rangatira) 9 7 Ngai Tahu/Te tau Ihu 6 - Te Atiawa (Taranaki) (Freshwater) 3 - Ngati Pukenga, Ngai Tamanuhiri, Ngati Whare, Ngati Ranginui (Freshwater) 2 - TOTAL 2,368 1,072 NOTE 7 CASH AND CASH EQUIVALENTS GROUP & PARENT $ 000 $ 000 For the purpose of the statement of cashflows, cash and cash equivalents comprise the following: Cash on hand and call deposits 5,068 7,221 TOTAL 5,068 7,221 22

23 NOTES TO THE cont d... NOTE 8 RECEIVABLES AND PREPAYMENTS GROUP & PARENT $ 000 $ 000 Trade receivables Receivables from sale of Anton s quota 3,517 - Dividend receivable 1,874 - Other receivables - 90 Prepayments Related Parties: Te Putea Whakatupu Trust Te Wai Maori Trust TOTAL 5, Trade receivables are generated from the sale of ACE and recovery of costs from associated entities. Other receivables include goods and services tax receivable at reporting date. Both amounts are recorded at their estimated realisable value. Receivables from sale of Anton s quota relates to last year s Te Ohu Kaimoana, Aotearoa Fisheries Limited and Sealord Group s purchase of Auckland company Anton s Seafoods deepwater quota. Te Ohu Kaimoana s contribution through Charisma Developments Limited was the purchase of a $5 million parcel of quota shares in FMA 1, largely Orange Roughy (ORH1) but including squid, alfonsino, ruby, cardinal and some other stocks. The quota was purchased with the intent to on-sell to iwi, through their Asset Holding Companies. Sale agreements for all of the quota were completed with $3.5 million accounted for as receivables at year end. All amounts were fully paid by 15 October Prepayments are the unexpired portion of insurances and travel expenses paid in advance at reporting date. The Trust makes payments on behalf of Te Putea Whakatupu Trust and Te Wai Maori Trust and issues invoices for recovery of those payments at the end of the following month. 23

24 NOTES TO THE cont d... NOTE 9 PROPERTY, PLANT AND EQUIPMENT Group & Parent OFFICE EQUIPMENT FIXTURE & FITTINGS IT HARDWARE IT SOFTWARE LEASEHOLD IMPROVEMENTS TOTAL $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 At 1 October 2012 Cost or Revaluation Accumulated Depreciation (103) (144) (78) (60) (310) (695) Opening Net Book Value Year Ended 30 September 2013 Opening Net Book Value Additions Disposals Depreciation Charge (3) (4) (18) (2) (79) (106) Closing Net Book Value At 30 September 2013 Cost or Revaluation Accumulated Depreciation (106) (148) (96) (62) (389) (801) Closing Net Book Value Year Ended 30 September 2014 Opening Net Book Value Additions Disposals Depreciation Charge (1) (2) (13) (1) (58) (75) Closing Net Book Value At 30 September 2014 Cost or Revaluation Accumulated Depreciation (107) (150) (109) (63) (447) (876) Closing Net Book Value

25 NOTES TO THE cont d... NOTE 10 INVESTMENT IN SUBSIDIARIES PARENT PARENT $ 000 $ 000 Investment in subsidiaries - at cost 11,797 11,797 Significant subsidiaries Principal Activity Balance date Percentage held Charisma Developments Limited Investment Holding 30-Sep 100% 100% Other subsidiaries: Te Ohu Kaimoana Portfolio Management Services Limited Portfolio Management 30-Sep 100% 100% Te Ohu Kaimoana Custodian Limited Custodial Services 30-Sep 100% 100% Te Ohu Kaimoana Development Fisheries Limited Non-trading 30-Sep 100% 100% Te Putea Whakatupu Trustee Limited Trustee 30-Sep 100% 100% Te Wai Maori Trustee Limited Trustee 30-Sep 100% 100% The single share in each company: Te Putea Whakatupu Trustee Limited and Te Wai Maori Trustee Limited is held jointly by the directors of Te Ohu Kai Moana Trustee Limited. 25

26 NOTES TO THE cont d... NOTE 11 INVESTMENT IN ASSOCIATES The Trust s investment in AFL is shown as an investment in associates in the balance sheet. The Act states that the Trust must retain control of 100% of the 125,000 voting shares and 20% of the 250,000 income shares in AFL. The balance of the income shares are to be held in trust for iwi until they are allocated. Shares held in trust for iwi are reported as a separate item in the balance sheet refer note 14. (a) Movements in the Carrying Amount of the Group s Investment in Associates GROUP & PARENT $ 000 $ 000 Share of associates (loss) / profit 4,391 (1,208) Share of associates other Comprehensive income (989) 1,280 Dividends receivable from Associates s76 (2) (1,756) - Equity Accounted Movement in Investment 1, Carrying amount as at 1 October: Share of increase/(decrease) in associates equity since acquisition 23,501 23,429 Cost of investment in Associates 57,396 57,396 80,897 80,825 Carrying amount as at 30 September 82,543 80,897 26

27 NOTES TO THE cont d... NOTE 11 INVESTMENT IN ASSOCIATES cont d... (b) Summarised financial information relating to the Group s associate GROUP GROUP $ 000 $ 000 Extract from Aotearoa Fisheries Limited Balance Sheet: Current Assets 38,360 31,952 Non-current Assets 493, , , ,302 Current Liabilities 45,101 34,499 Non-current Liabilities 74,408 64, ,509 98,817 Net Assets 412, ,485 Share of Associate s Net Assets 82,543 80,897 Extract from Aotearoa Fisheries Limited Income Statement: Revenue 162, ,358 Share of (loss) / profit for the year 4,391 (1,208) Share of other comprehensive income for the year net of tax (989) 1,280 Share of total comprehensive income for the year net of tax, attributable to the shareholders 3, Contingent Liabilities Relating to Aotearoa Fisheries Limited

28 NOTES TO THE cont d... NOTE 12 REDEEMABLE PREFERENCE SHARES (RPS) On 22 December 2004, the Trust received $20 million face value of RPS issued by AFL Investments Limited (a wholly owned subsidiary of Aotearoa Fisheries Limited) in satisfaction of loans owed by AFL to the Trust. The RPS are supported by a guarantee from and a put option to AFL. The RPS were subsequently transferred to Charisma Developments Limited, a wholly owned subsidiary of the Trust. The non-interest bearing redeemable preference share comprises 20 million shares with an issue price of $1 per share. In case of liquidation of AFL Investments Limited the RPS will be repaid in priority to other classes of equity in AFL Investments Limited. The RPS agreement allows the Trust to put the RPS to AFL at any date from 29 November 2011 to 29 November The redemption price is to be determined through negotiation between the parties, but cannot exceed $1 per share. From 29 November 2011, the first redemption date, the RPS have been treated as a current asset. GROUP GROUP $ 000 $ 000 Carrying value at reporting date 20,000 20,000 NOTE 13 OTHER FINANCIAL ASSETS Under the Trust s investment structure, Te Ohu Kaimoana Portfolio Management Services Limited (Portfolio Management Services) was established to assume the overall administration and management of the Joint Investment Portfolio for the Trust and its two associated trust entities, Te Putea Whakatupu and Te Wai Maori. The Directors of Portfolio Management Services are currently members of Te Ohu Kai Moana Trust s Audit & Risk Committee. The legal title of all investments in the joint portfolio are held in the name of Te Ohu Kaimoana Custodian Limited as custodian. The custodian has no beneficial interest in any of the assets registered in its name. The Trust shares on a proportional basis the income generated and valuation movements based on the percentage held of the total portfolio. 28

29 NOTES TO THE cont d... NOTE 13 OTHER FINANCIAL ASSETS cont d... GROUP & PARENT $ 000 $ 000 Balance as at 1 October 73,319 72,211 Gains on investment portfolio 4,352 3,108 Withdrawals during the year (3,900) (2,000) Balance as at 30 September 73,771 73,319 NOTE 14 AOTEAROA FISHERIES LIMITED INCOME SHARES HELD IN TRUST FOR IWI GROUP & PARENT $ 000 $ 000 Increase /(decrease) in holding value of Aotearoa Fisheries Limited income shares held in trust for iwi Shares transferred to iwi during the year - (905) Movement in value of shares held in trust 110 (900) Carrying value of shares held in trust at 1 October 5,392 6,292 Carrying value of shares held in trust at 30 September 5,502 5,392 Represented by Share of Increase/(Decrease) in Net Assets since Appointed Day 1,677 1,567 Cost of Shares held in trust at original cost 3,825 3,825 Net Asset value of Income Shares held in trust 5,502 5,392 The Act required the Trust to hold 80% of the income shares in AFL, received on the Appointed Day, 29 November 2004, for allocation and transfer to iwi. The Trust recorded the investment based on the net asset value of AFL at the Appointed Day. The movement in net assets reported by AFL each year is added to the value of the remaining income shares held in trust in the proportion that the number of shares held relates to the total income shares on issue. Shares transferred to iwi are recorded at the value that includes the movement in net assets for the year ending on the previous reporting date. 29

30 NOTES TO THE cont d... NOTE 14 AOTEAROA FISHERIES LIMITED INCOME SHARES HELD IN TRUST FOR IWI cont d... The total number of shares held in trust as at 30 September 2014 as follows: NUMBER OF SHARES HELD IN TRUST Iwi Te Whanau a Apanui 2,976 2,976 Ngati Tama Muaupoko - - Ngati Maru - - TOTAL 3,330 3,330 The value of assets held in trust for iwi in relation to AFL income shares is: Iwi AFL INCOME SHARE VALUE DIVIDENDS MATCS AFL INCOME SHARE VALUE DIVIDENDS MATCS $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Te Whanau a Apanui 4, , Ngati Tama Muaupoko Ngati Maru TOTAL 5, , The dividend expected from AFL on income shares held in trust for iwi as at 30 September 2014 is $117,060 (2013: nil). Refunds of Maori Authority Tax Credits (MATCs) relating to AFL income shares held in trust are accounted for when received from IRD. Refunds are paid to iwi at the same time the income shares are transferred to iwi or when received from IRD. 30

31 NOTES TO THE cont d... NOTE 15 QUOTA SHARES GROUP GROUP PARENT PARENT $ 000 $ 000 $ 000 $ 000 Year ended 30 September Opening net book amount 42,526 53,722 42,342 53,538 Allocated to iwi (210) (11,196) (210) (11,196) Closing net book amount 42,316 42,526 42,132 42,342 Deemed cost 42,316 42,526 42,132 42,342 Net book value 42,316 42,526 42,132 42,342 In accordance with the Group s accounting policies, quota shares, being intangibles with indefinite useful lives are initially recorded in these financial statements at deemed cost and tested for impairment annually. Cost is represented by the fair value of the quota parcel vested in the Trust on the 29 November The original fair value of the quota parcel was determined through an independent valuation process. The parcel remaining as at 30 September 2014 was tested for impairment by having the quota shares valued on 1 October 2014 by two independent valuers. The market value of the portfolio of the quota shares held ranged from $102.3 million to $133.8 million after allowing for costs to sell. As the carrying value of the quota shares held was less than the market value, no impairment has occurred. Charisma Developments Limited held $184,000 (2013: $184,000) of quota shares relating to the Trust s participation in development fisheries at reporting date. These quota shares do not form part of the quota shares held in trust for allocation to iwi under the Act. Quota shares held by Charisma related to Orange Roughy (ORH1) and other species from the purchase of Anton s Seafoods deepwater quota do not form part of the quota shares held in trust. These shares were subject to sale agreements with various iwi at year end and transferred to them in October 2014 on receipt of payment of the agreed price. In September 2010 the Group received an allocation of 25,628 New Zealand Units (NZUs) as part of the compensation to quota owners under the Fishing Allocation Plan allowed for in the Climate Change Response Act The NZUs will be allocated to iwi based on their proportionate share of the quota shares held by the Trust as at 24 September The total balance of NZUs for the Group as at 30 September 2014 is 11,938 units (2013: 14,745 units). No value was ascribed to the NZUs at balance date. 31

32 NOTES TO THE cont d... NOTE 16 PAYABLES AND ACCRUALS GROUP & PARENT $ 000 $ 000 Trade payables Employee entitlements Income received in advance Other payables TOTAL 1,611 1,308 Income received in advance relates to the April 2014 ACE round. All income from the sale of ACE is accrued and amortised over the twelve months of the fishing year. The revenue is then matched to the levies, charges and overhead expenses incurred on a monthly basis. When shares are transferred to iwi during the year, the levies and charges for the remainder of the fishing year are refunded. The balance of income received in advance is the un-amortised income for the six months from 1 October 2014 to 31 March Other payables includes GST payable on the sale of the Anton shares to iwi. NOTE 17 MAORI FISHERIES ACT ASSETS ALLOCATED AND NOT TRANSFERRED In accordance with our accounting policy assets that have been allocated but not transferred to the relevant mandated iwi organisation or its asset holding company are classified as liabilities in the balance sheet. There were no assets allocated and not transferred as at 30 September 2014 (2013: nil). 32

33 NOTES TO THE cont d... NOTE 18 PROVISIONS FOR OTHER LIABILITIES AND CHARGES YEAR REVIEW GROUP & PARENT 11-YEAR REVIEW TOTAL $ 000 $ 000 $ 000 Balance as at 1 October Provisions during the year Amounts used during the year - (373) (373) Balance as at 30 September Current Non-current Balance as at 30 September YEAR REVIEW 11-YEAR REVIEW TOTAL $ 000 $ 000 $ 000 Balance as at 1 October ,023 Provisions during the year (19) Amounts used during the year (72) - (72) Balance as at 30 September Current Non-current Balance as at 30 September The Act requires an audit of the activities of the Trust to be arranged every four years, (s105/s106), and an independent review to be completed no later than eleven years after its commencement, (s114). Provisions made for a proportion of the estimated future cost for each have been recognised in the statement of comprehensive income. No provisions have been made for the 4-year audit after the last audit was completed at the end of The 11-year review is currently in progress with a final report due to the Committee of Representatives in February A special meeting will be held in May 2015 to discuss the review and consider any plans of action submitted. Contracted obligations in relation to the review are expected to fully use the amount provided for. 33